The Long-run Effect of Foreign Direct Investment on Total Factor Productivity in OPEC Countries

Nowadays, all developed or developing countries emphasize the importance of productivity as one of thenecessities of economic development and the acquisition of competitive advantage in international arenasbecause in the current world, competition on global scenes has taken other dimensions and efforts toachieve higher levels of productivity are one of the main pillars of the competitions. Thus, mostdeveloping countries have invested or are significantly investing in this area in order to promote theattitude of productivity and generalization of its techniques’ application and improvement methods. Oneof the important factors for economic growth and development of countries is also to provide sufficientcapital to finance investment. As a result, developing countries have attempted to concentrate the capitalthrough domestic resources, or then completed by foreign investment. Given the importance of thementioned matter and topic, the study investigated the long-term effects of foreign direct investment(FDI) on the total factor productivity in OPEC countries. The results of the research indicate that thevariables of population, foreign direct investment, human capital, domestic credits by the private sectorwere positively and significantly affected by the total factor productivity. Therefore, the total factorproductivity enhanced with the increase of these variables. But the degree of openness of the economyhas a negative and significant effect on the total factor productivity. As well as, other results evaluatedthe long-term effects of foreign direct investment on total factor productivity in OPEC countries.According to the estimation, the long-term effects of variables of total factor productivity and foreigndirect investment can be confirmed by Kao co-integration test.

Keywords:

Total Factor Productivity , Foreign Direct Investment , OPEC Countries